STORY: Stocks plunged Monday across the board, with the S&P 500 entering a new bear market as investors sold stocks amid worries that the Federal Reserve will need to be more aggressive to tame inflation – sparking fears it will trigger a recession.
The Dow fell almost 2.8%, the S&P shed nearly 3.9% and the Nasdaq dropped nearly a stunning 4.7%.
The benchmark S&P has fallen for four straight sessions and is now down more than 20% from its most recent record closing high.
Zach Hill, head of portfolio management at Horizon Investments, says this bear market is likely to stick around a while.
“The S&P 500 has entered a bear market because the Fed wants it to. We’ve been talking about ‘don’t fight the Fed’ – that’s been the ethos for investors since the global financial crisis, really – and in 2022 when inflation is the Number One issue, ‘don’t fight the Fed’ means tighter financial conditions. Which means lower equity valuations, wider credit spreads and a stronger dollar. So, we’ve seen all those so far this year, and until we see inflation start to come under control we think it likely continues.”
The longest bear market ever for the S&P lasted just over five years, while the shortest lasted just over a month, according to S&P Dow Jones Indices.
On Monday, high-growth heavyweights such as Apple, Microsoft and Amazon were the biggest drags on the market, as the yield on the benchmark 10-year U.S. Treasury note hit 3.44%, its highest level since April 2011. Growth stocks are more likely to see their earnings suffer in a rising rate environment.
A hotter-than-expected consumer price index reading late last week prompted traders to brace for steeper interest rate hikes from the Fed, which is scheduled to make its next policy announcement on Wednesday.